The construction industry is already seeing huge impacts from the coronavirus pandemic, from delayed material supplies to shuttered projects to legal disputes over non-payment. Before COVID-19, construction businesses had been enjoying one of the longest economic booms in recent memory. Now, a recession may be inevitable – though it’s too early to tell how long an economic downturn will last.

One thing is certain: Cash flow will make or break contractors and suppliers during a downturn. Construction businesses need to get paid for the work they are doing, and build up cash reserves as much as possible to survive the coronavirus and the months ahead. Even in good times, getting paid in construction can be frustrating and difficult. During this period of coronavirus-fueled uncertainty, it’s more important than ever for construction businesses to take every step they can to protect their payment rights.

Contractors and suppliers should take simple, concrete steps now to give themselves the best chance to survive the COVID-19 outbreak.

As COVID-19 continues to push the US economy towards a recession, construction businesses should be taking every step they can to build up their cash reserves. The Coronavirus Aid Relief & Economic Security (CARES) Act created a number of programs to help, including SBA loans and cash for infrastructure projects. Contractors and suppliers should also be exploring lines of credit, invoice factoring, and other options to improve their cash flow. Apply now for SBA loans and more with a single application.

Is construction allowed in your state?

As states and cities declare stay-at-home and shelter-in-place orders, many “non-essential” businesses are being forced to close. While the Department of Homeland Security (DHS) has issued guidelines for critical industries during a national emergency, states are generally free to define “essential” as they see fit. In some states, construction is specifically mentioned as an essential business, while others are more vague with their directives.

Prepare for supply chain disruptions

With border shutdowns and restrictions on travel and transport, construction companies need to prepare for some disruptions to supply chains. To anticipate these delays and increased costs, companies need to start planning ahead to identify alternative building material sources, and adjust their project schedules and contracts accordingly.

Coronavirus & business interruption insurance

Construction companies need to begin preparing for the inevitable financial losses associated with loss of income. To protect their company from these coronavirus-related losses, one consideration should be to seek out coverage under a business interruption insurance policy.

Cash flow options

While construction projects are delayed or cancelled, contractors and suppliers still have bills to pay and expenses to meet. They would do well to assess their financial situation and cash flow needs now, and determine what additional infusions they may need to ride out the downturn. Construction businesses that anticipate needing extra cash have a number of viable options, including US Small Business Administration (SBA) Disaster Relief Loans, a line of credit, bank loans, invoice factoring, and more.

Protect your payment rights

As cash and credit lines dry up, the coronavirus outbreak may make it more difficult for contractors and suppliers to get paid. But in this unprecedented situation, you may not have time to follow the normal mechanics lien process. The most important thing you can do is act now to protect your lien rights.

Lien rights & field hospital construction

To increase patient capacity, some cities are hiring contractors to build mobile field hospitals. While highly important work, building temporary structures can be a financial risk. Most states don’t give construction companies lien rights for work on these types of projects.

County office closures: How to record mechanics liens & other documents remotely

Every day, more county offices across the US are closing. However, construction businesses still need to record important construction documents to secure their right to payment. Such as notices, mechanics liens, and more. In most cases, contractors and suppliers have options to record a lien or notice remotely.

County Recorder & Clerk Office Closures

With the unpredictable nature of current events, there may be some confusion as to whether or not recording offices around the country are still accepting documents for recording.

While we cannot guarantee that this page will contain every closure or delay, we are working diligently to update information as we receive it. If you have any specific questions, please contact the county directly so they can provide you with the most current information on their status.

What can contractors do to reduce payment delays or prevent non-payment during a pandemic?

The way for construction businesses to protect themselves is to be proactive in reducing or eliminating payment problems during the coronavirus outbreak. These steps are generally the same that are recommended on every project; which include:

Can I still file a mechanics lien or notice if the county office is closed?

Generally, yes. Many recorder’s offices provide the ability to file documents remotely. However, you should continue to monitor the status of your county recorder’s office. Coronavirus closures may affect the office’s normal capabilities or procedures.

Will a delay caused by coronavirus cause me to default on my contract?

The answer to this question will ultimately be determined by the terms of the contract itself. Generally, most construction contracts contain delay provisions and force majeure clauses. These will determine what types of delays are permissible, if compensation is available, and if the delay constitutes a breach of contract.

What can I do if a customer cancels my contract over coronavirus?

The options available will generally depend on the language in your contract. Most construction contracts contain a termination clause that spells out the scenarios, notice requirements, and procedures necessary to terminate the contract.